Pendle's strategic transformation: Boros emerges, innovating the funding rate trading paradigm.

Author: J.A.E, PANews

Pendle, which innovates on-chain yield trading with the PT/YT mechanism, is expanding its territory into the trillion-dollar derivatives market. On August 6, 2025, its new product Boros will launch, achieving on-chain tokenization and hedging of perpetual contract funding rates for the first time, marking a key strategic transformation for Pendle from a "yield management protocol" to "DeFi interest rate infrastructure."

In the past year, Pendle has achieved explosive growth, with a TVL exceeding 10 billion USD, and is no longer limited to splitting existing yields, but is committed to building a complete on-chain yield curve.

Nansen pointed out: "Pendle is becoming the interest rate infrastructure in the DeFi space." The birth of Boros is a core piece to realize that ambition.

Boros Core Mechanism: The "Interest Rate Derivatives" Market for Funding Rates

Pendle has built a new platform called Boros on Arbitrum, with the core function of converting the highly volatile funding rates in perpetual contracts into tradable tokenized instruments—Yield Units (YUs). Each YU represents the right to the yield of 1 unit of collateral (such as BTC/ETH) over a specific period (for example, 1 YU-ETH represents the yield of 1 ETH nominal value until maturity). The mechanism of Boros is based on the YTs (Yield Tokens) that represent future yield rights in Pendle V2, and the logic is similar to interest rate derivatives in TradFi.

Boros has created a floating-fixed funding rate swap market, allowing users to hedge risks or speculate on the rise and fall of funding rates according to their needs. Boros provides effective on-chain tools for users with risk hedging needs. Users facing funding rate risks due to executing spot-perpetual contract basis arbitrage or Delta-Neutral strategies in the perpetual contract market can offset their funding rate exposure on exchanges by paying a fixed rate and receiving a floating rate on Boros, thereby earning profits or locking in maximum holding costs.

Similarly, Boros has created a new trading variety for users with trading needs, allowing users to predict the future trend of funding rates. They can go long on YU to bet on its rise or go short on YU to bet on its fall, thus profiting from the fluctuations in funding rates. It is worth noting that, within the same time frame, the volatility of perpetual contract funding rates is much higher than that of its price.

The Pendle team believes that risk management is the primary focus in the early stages, so Boros has adopted a cautious risk control strategy, with an open interest (OI) limit of $20 million nominal value and a leverage ratio controlled at 1.4 times.

Addressing market pain points: Injecting stability and efficiency into DeFi

In the cryptocurrency market, the trading volume of derivatives far exceeds that of spot trading.

Perpetual contracts are the main trading variety, with an average daily trading volume of about 1 trillion US dollars.

Referring to the derivative market structure of TradFi, the interest rate swap market accounts for the vast majority of trading volume. Perpetual contracts are equivalent to the cornerstone of cryptocurrency derivatives, and the funding rate derivatives market closely related to them may become one of the emerging markets with the potential for the largest scale in the entire DeFi ecosystem.

However, the high volatility of funding rates and the lack of effective on-chain hedging tools are long-standing "pain points" in the DeFi derivatives market, which not only increase users' risk exposure but also limit the entry of incremental capital and the stability of DeFi strategies.

The emergence of Boros is particularly important for Delta-Neutral protocols. Such protocols typically rely on funding rates to maintain returns and have a strong demand for stable yields and risk hedging. Taking Ethena as an example, it has a TVL of over 10 billion, and the issued stablecoin USDe is supported by volatile assets such as BTC, ETH, and LST. To achieve Delta-Neutral conditions, Ethena uses collateral as a spot position and opens a short perpetual contract position on exchanges to hedge against price fluctuations.

Although Ethena maintains a Delta-Neutral position, it still has to bear the funding rate charged by the exchange, which is also one of Ethena's revenue sources. When the funding rate is positive (long OI > short OI), Ethena profits because longs pay funding rates to shorts; however, when the funding rate is negative (short OI > long OI), Ethena incurs losses. At this time, Boros can act as a key "shock absorber" to help mitigate the risks brought by negative funding rates and smooth the earnings curve.

TN Lee, co-founder and CEO of Pendle, emphasized: "The daily trading volume of the perpetual contract market reaches hundreds of billions of dollars, yet there has never been a scalable, permissionless on-chain method to hedge or trade funding rates. Boros will change that." Infrastructure-level enhancements may also attract more incremental capital.

Value Proposition: Empowering Ecosystem for Mutual Benefit

Boros was launched on August 6, and $PENDLE surged over 40% within the week, approaching $6. The strong upward momentum also validates the market's recognition of its potential.

Boros will enhance the value capture ability of $PENDLE, with 80% of the fees generated by the protocol being distributed to vePENDLE holders, thereby solidifying vePENDLE's position as the core value capture module of the ecosystem. The accumulation of fees in vePENDLE will create a powerful positive feedback loop. An increase in the usage of Boros can bring more fees to vePENDLE, feeding back into more $PENDLE locking, further strengthening the incentive effect.

Boros has opened a dedicated Vault for LPs, allowing them to earn returns by providing liquidity to the funding rate swap market. The sources of income include $PENDLE emission incentives, trading fees, and favorable changes in the implied annualized yield.

Future Vision: The Revenue Layer Across On-Chain Finance

Boros initially only opened the funding rate market for BTC and ETH perpetual contracts on Binance, with plans to gradually expand to more mainstream perpetual contract platforms (such as Bybit, Hyperliquid, Bybit) and high liquidity assets (such as SOL, BNB). The well-known market maker Caladan stated that it is providing liquidity for Boros.

In principle, Boros can be integrated into the entire DeFi ecosystem, becoming a core interest rate module, which means it is not only an independent DApp but also a highly composable "Lego block" that can be seamlessly called by other protocols.

At the same time, the underlying architecture design of Boros has a high level of scalability, which may unlock more types of variable income sources. In addition to the income from within DeFi protocols, it can also integrate: 1) CeFi income products, such as structured products from CEX; 2) TradFi income tools, such as stocks, government bonds, money market rates, and mortgage rates; 3) RWA: including tokenized credit and private debt.

Boros enables the feasibility of most forms of yield streams to become tradable financial instruments and collateral, driving DeFi towards a more complete on-chain interest rate market, improving capital efficiency, and paving the way for risk-controlled leveraged strategies. In the long term, Boros can not only develop into the yield layer of DeFi but may also evolve into the yield layer of a broader tokenized financial ecosystem. When DeFi has the capability to replicate the core interest rate markets of traditional finance, a true paradigm shift is imminent.